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Seniors beware: The age of no-cost banking might be ending

The more seniors there are, the more expensive it is to give them freebies and special discounts.

So with our aging population, it's easy to see Toronto-Dominion Bank 's decision to stop opening no-cost bank accounts for clients aged 60 and older as a trendsetting move. As of March, TD Canada Trust branches have been offering three different account packages to older clients with a 25-per-cent discount off regular account fees. Other banks and credit unions still offer no-cost banking to seniors, but you can bet they'll be studying TD's move.

Canada's second-largest bank has forestalled a backlash by allowing more than two million current holders of its no-cost Plan 60 account to maintain the status quo. But clients who turn 60 now have to pay fees of $8.20 to $22.45 a month after discounts unless they maintain large enough balances to qualify for fees to be waived entirely. That takes a minimum $2,500 to $5,000 a month, depending on the account.

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TD spokeswoman Barbara Timmins said the free seniors account was chopped as part of a regular review of how the bank's products mesh with changing demographics.

"With an evolving boomer group, that means offering accounts to customers over 60 that reflect their diverse situations – whether that's something basic, mid-range or premium," she said. "We also have to balance those considerations with the bank's longer-term needs for continued growth."

Statistics Canada estimates that the country's population could exceed 40-million by 2036, and that as many as 10-million to 11-million people could be seniors. Offering free banking to that many people is a lost revenue opportunity of major proportions. Banks would be extra sensitive to that in today's world, where low interest rates and treacherous financial markets have hurt other lines of business.

But there's another trend at work here. Bluntly put, many baby boomers don't need banking discounts.

"The seniors of today are quite different from what they were back when the senior's plan was invented [decades ago]," said David McVay of McVay and Associates, a financial services consulting firm. "Many are still working, and many are better off than [seniors] were back then. The question at the banks is always, why are we discounting banking services for what turns out to be our wealthiest customers?"

Other banks may be asking that question, but they still offer no-cost accounts to seniors. Bank of Nova Scotia's Scotia Plus Program for Seniors offers cost-free banking for seniors with a refreshing lack of fine print or hidden fees. It also kicks in when customers turn 5 9, not the usual 60. Bank of Montreal and Canadian Imperial Bank of Commerce also offer free plans to seniors.

A couple of other banks have also done away with dedicated seniors accounts, but they haven't been so bold as TD in eliminating free banking for this group. Royal Bank of Canada offers a seniors' rebate that offsets the monthly cost of a variety of accounts to varying degrees. Note: In some cases, the client may need to have certain RBC products to qualify for a full rebate. HSBC Canada offers a fee waiver on an unlimited chequing account to seniors.

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Credit unions are also an option for seniors seeking no-hassle, no-fee bank accounts. Here's what Southern Ontario's Meridian Credit Union offers to clients age 60 and older: Free unlimited debits, one free order of cheques a year, no charge for paper monthly statements, no charge for using a passbook (remember those?), free certified cheques and travellers cheques, a limited number of free money orders and discounts on safe deposit boxes.

TD's updating of its seniors accounts represents a modernization in more ways than one. With two of the three accounts, customers must pay $2 for a monthly paper statement and $2.25 for a passbook. Otherwise, they can use paperless recordkeeping, where you monitor your account online or download online statements. Both paper statements and passbooks are free to existing Plan 60 clients.

The aging population may eventually put an end to free chequing accounts for people 60 and older, but seniors shouldn't feel forsaken. Notice the growing numbers of financial planners in branches to help with retirement planning, and also the availability of sit-down teller windows and low ATMs. Wait a second – if seniors are such important customers, doesn't that suggest they should insist on free banking? Just asking.

Banking charges for seniors

Toronto-Dominion Bank's TD Canada Trust branches have stopped offering free chequing to seniors signing up for a new account. Options for the bank's clients aged 60 and over now include three chequing accounts offered with a 25-per-cent discount.

Account

Monthly fee (after discount)

Fee waived with this minimum balance

Number of debit transactions

1. Select Service

$22.45

$5,000

unlimited

2. Infinity

$11.20

$3,500

unlimited

3. Value Plus

$8.20

$2,500

25 per month

Existing customers of TD's no-cost Plan 60 account can continue with that option.

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About the Author
Personal Finance Columnist

Rob Carrick has been writing about personal finance, business and economics for close to 20 years. He joined The Globe and Mail in late 1996 as an investment reporter and has been personal finance columnist since November 1998. Rob's personal finance columns appear in The Globe on Tuesday and Thursday, and his Portfolio Strategy column for investors appears on Saturday. More

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